Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : OXY: Occidental Petroleum Corp -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (20)	4/25/2008 9:38:08 AM
From: Dennis Roth	Read Replies (1) \| Respond to of 24

Occidental Petroleum Corp. (OXY): Strong returns and resource base, but shares appear fairly valued - Goldman Sachs - April 25, 2008 What's changed Occidental Petroleum reported adjusted 1Q2008 EPS of $2.20, ahead of the $1.98 both we and the First Call consensus forecast. Higher chemicals earnings (+$0.08) and a lower tax rate (+$0.04) together accounted for nearly half of the variance versus our estimate, with the remainder driven by higher E&P earnings. Total production of 611 MBOE/d was in line with our 612 MBOE/d estimate, while higher realized international gas prices drove most of the E&P earnings upside. The company also provided initial 2Q production guidance of 610-620 MBOE/d and slightly increased its 2008 capital budget to $4 billion from $3.8 to $3.9 billion previously. We have modestly boosted 2008-2012 EPS. Implications We continue to have a favorable view of Oxy given the company’s strong returns on capital, high-quality resource base, and leverage to our bullish commodity price outlook, all of which were evident in its solid 1Q results. However, following the successful ramp-up of the company’s Dolphin project, Oxy’s production growth outlook slows meaningfully as we look to 2009 and beyond. Given Oxy’s strong position in the Middle East and cash flow generation potential we are less concerned about its less visible growth outlook, though believe that some combination of favorable project announcements, select acquisitions, or exploration success will likely be necessary to achieve a mid-single digit long-term volume growth rate. We currently see a more favorable risk/reward in shares of ConocoPhillips (Conviction Buy) among integrated oils and Valero Energy (Conviction Buy) among refiners. Valuation Oxy shares currently trade 5% above our unchanged $78, 12-month target price, which is based on asset value, P/E and cash flow valuation analyses. Key risks Key risk is sustained lower commodity prices.